Bitcoin's Rough Week Leads to Over $700M Liquidation

By: Eliza Bennet

Bitcoin's Plunge Not Uncommon

Bitcoin's performance took a downward turn this week, triggering over $700 million of liquidations. The cryptocurrency experienced its largest one-day drop since Dec. 11, a decrease of 4.7%, marking only the sixth time in the past 12 months that a greater one-day drop has been observed.

The decline originated from a series of liquidations that occured within a 24-hour window, with Bitcoin's share amounting to $170 million. These liquidations were triggered by short-term investors who have been holding bitcoins for less than 155 days. It was reported that these investors transferred roughly $1 billion of bitcoin to exchanges while at a loss, marking the fourth significant loss related to transfers to exchanges within the year.

These liquidations, which were primarily manifested by long positions who saw contracts worth about $568 million liquidated equating to approximately 86% of the total liquidations, resulted in Bitcoin falling below $43,000. This has subsequently led to severe reductions in the values of leading altcoins Ethereum and Solana, further compounding market instability. Nonetheless, some market analysts have stated that the decline is not an abnormal occurrence within the market's general volatility, particularly in light of the cryptocurrency's recent performance.

Inconsistent Forecasts Sow Market Uncertainty

The bearish trend, which has roiled the market, has also been fueled by mixed messages within the bitcoin community. The crypto financial services platform, Matrixport, has reportedly issued two contrasting publications on Jan. 2, sparking further volatility. The first predicted Bitcoin could swell to $50,000 in January, driven by the potential approval of Bitcoin spot ETFs. However, just hours later, Matrixport seemingly contradicted its previous statement, arguing that the current political environment and the cautious stance of SEC chairman Gary Gensler could obstruct the approval of a Bitcoin ETF, thereby causing a downturn in the cryptocurrency market.

Amid the market turmoil, Bitcoin is currently trading at around $42,700, but it is expected that the volatility will continue as anticipation about the potential ETF approval persists.